Electric Two-Wheelers in India Face A Subsidy Cut

Two-wheelers in India have been the lifeline of commute for ages. A powerful undercurrent of change now electrifies this traditional scenario, swapping petrol guzzlers with sustainable, battery-powered alternatives. The swarm of over 1.3 million electric two-wheelers on India’s roads is the vanguard of an ambitious national goal: 80% electric two- and three-wheelers by 2030.

Roadblock: Diminishing Subsidies

This green rally began recently, when electric scooter sales faced a sudden slowdown, primarily attributed to significant subsidy cuts. The unfolding scenario suggests market consolidation and possible exits of some players.

The Indian government introduced a revised avatar of the FAME-II (Faster Adoption and Manufacturing of [Hybrid and] Electric Vehicles) scheme in May, cutting subsidies to $122 per kW/h of battery capacity, a considerable dip from the previous $183 per kW/h.

Backlash: Slipping Sales

The policy pivot created a bit of chaos in the electric two-wheeler market. Sales plummeted by 56% to 45,829 units in June, from 105,371 units in May. This jolting drop marked June 2023 as the slowest month of the year, even falling below figures from any month in the last half of 2022.

The revamp responded to the unprecedented sales pace of subsidized electric two-wheelers, which zoomed past the million-unit mark faster than anticipated. To prevent prematurely draining the subsidy pool, the government elected to decrease the per vehicle subsidy instead of halting the scheme.

Changing Gears: Market Reactions and Readjustments

Facing the heat of reduced subsidies, manufacturers had no choice but to adjust their price tags, leading to a slowdown in sales. Market stalwarts, Ather Energy and Ola Electric, had to hike their scooter prices by about $100.

Voices from the industry, including the Society of Manufacturers of Electric Vehicles (SMEV), along with market analysts, expressed concern over the subsidy cuts, fearing they might hamstring local development and dampen adoption rates. These voices call for a recalibration of the government’s strategy.

Even with the subsidy cuts, some market observers hold steadfast, suggesting manufacturers need to unearth innovative ways to ensure their models remain competitive. They contend that sales may recover as consumers acclimatise to the new pricing norms. High fuel prices will also keep the total cost of EV ownership appealing.

The New Route: Market Evolution

The ascent in electric two-wheeler prices is expected to reroute consumer preference from high-speed electric scooters to affordable, low-speed alternatives.

Manufacturers will need to navigate uncharted terrains, offering creative financial schemes, pay-per-use models, and exploring options to separate vehicle and battery ownership.

The challenging market dynamics might prove overwhelming for companies lacking strong R&D capabilities, potentially leading to market consolidation. Agile newcomers might zoom ahead, capturing significant market share while legacy players could face a roadblock.

The electrification journey in India may be winding, filled with unexpected detours, but the destination remains an unwavering vision: a greener future propelled by electric vehicles. The aftershocks of policy shifts and market adjustments will steer the direction of this electric revolution.